No turnaround in lending, National Bank Q2 survey shows

MTI – Econews

Thursday, August 25, 2011, 10:45

In the corporate segment, banks reported that they had not changed credit conditions significantly, after tightening in previous quarters. However, developments in 2011 Q2 should not be regarded as a turning point, as banks expect a further tightening in credit conditions for the corporate sector (mainly in the premium on riskier loans) in second half of 2011, indicating their continued risk aversion.

The risk-sensitivity of banks increased further in financing the municipal segment in 2011 Q2, with banks almost unanimously continuing to tighten credit conditions. Many banks experienced a deterioration in the quality of their outstanding municipal-loan and bond portfolios, which resulted in a higher need for restructuring. Based on the responses, banks restructured 1% of their total portfolio of loans to municipalities by the end of 2011 H1. However, this ratio may reach 10% by the end of 2011, according to banks active in the municipal sector.

The National Bank of Hungary launched its questionnaire-based survey in the spring of 2003. The survey, conducted on a quarterly basis, gathers information on the lending practices of Hungarian commercial banks. It aims to present the assessment of banks regarding domestic market credit conditions. The latest survey is based on the questionnaires completed by banks in the first half of July 2011, reflecting their responses to backward-looking questions related to 2011 Q2 and their expectations for 2011 H2.

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